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02/21/2005

Sell the Right to Immigrate-BECKER

Rich nations are facing enormous pressure to increase the number of immigrants because of their sharp limits on the number of legal immigrants accepted, and the huge numbers who try to cross borders illegally. This immigration pressure stems in major part from the very large gap between the earnings of workers at all skill levels in the United States, Western Europe, and Japan compared to the rest of the world. In addition, low birth rates in the developed world create excellent opportunities for young persons from poorer nations, and travel between nations has become much cheaper.
The United States, the leading destination for immigrants, uses quotas that give preference to family members of persons already here legally, to applicants with greater skills, to persons who applied earlier, and some other criteria. Since I am a free-trader, readers might expect my preferred alternative to the present system to be 19th century-style unlimited immigration. I would support that if we lived in the 19th century world where government spending was tiny. But governments now spend huge amounts on medical care, retirement, education, and other benefits and entitlements. Experience demonstrates that in our political system, it is impossible to prevent immigrants, even those here illegally, to gain access to these benefits. I believe that with unlimited immigration, many would come mainly because they are attracted by these government benefits, and they would then be voting to influence future government spending and other public policies.
Given these realities of free immigration, the best alternative to the present quota system is an ancient way of allocating a scarce and popular good; namely, by charging a price that clears the market. That is why I believe countries should sell the right to immigrate, especially the United States that has so many persons waiting to immigrate. To illustrate how a price system would work, suppose the United States charges $50,000 for the right to immigrate, and agrees to accept all applicants willing to pay that price, subject to a few important qualifications. These qualifications would require that those accepted not have any serious diseases, or terrorist backgrounds, or criminal records.
Immigrants who are willing to pay a sizeable entrance fee would automatically have various characteristics that countries seek in their entrants, without special programs, point systems, or lengthy hearings. They would be younger since young adults would gain more from migrating because they would receive higher earnings over a relatively long time period. Skilled persons would generally be more willing to pay high entrance fees since they would increase their earnings more than unskilled immigrants would. More ambitious and hard working individuals would also be more eager to pay since the U.S. provides better opportunities than most other countries for these types.
Persons more committed to staying in the United States would also be more likely to pay since individuals who expect to return home after a few years would not be willing to pay a significant fee. Committed immigrants invest more in learning English, and American mores and customs, and become better-informed and more active citizens. For obvious reasons, political refugees and those persecuted in their own countries would be willing to pay a sizeable fee to gain admission to a free nation. So a fee system would automatically avoid time-consuming hearings about whether they are really in physical danger if they were forced to return home.
The pay-back period for most immigrants of a $50,000 or higher entrance fee would generally be short-less than the usual pay-back period of a typical university education. For example, if skilled individuals could earn $10 an hour in a country like India or China, and $40 an hour in the United States, by moving they would gain $60,000 a year (before taxes and assuming 2000 hours of work per year). The higher earnings from immigrating would cover a fee of $50,000 in about a year! It would take not much more than four years to earn this fee even for an unskilled person who earns $1 an hour in his native country, and could earn $8 an hour in the U.S.
These calculations might only indicate that $50,000 is too low an entrance price, and that an appropriate fee would be considerably higher. But with any significant fee, most potential immigrants would have great difficulty paying it from their own resources. An attractive way to overcome these difficulties would be to adopt a loan program to suit the needs of immigrants who have to finance entry.
One could follow the present policy toward student loans, and have the federal government guarantee loans to immigrants made by private banks. However, I objected to that program in a January 9th entry in this blog, and suggested instead removing the federal guarantees while retaining that education loans are not dischargeable through personal bankruptcy. The same approach would work for immigration loans since these are also investments in human capital. Of course, it would be difficult to collect from immigrants who return home, and that would lead to higher interest rates on these loans. But such forfeiture would be discouraged too if banks forced immigrants to make large enough down payments in order to get their loans.
Countries that charge a sizeable fee would have an incentive to raise the number of immigrants accepted because they would bring in tax revenue that cuts the tax burden on natives. For example, one million immigrants per year who each paid $50,000 would contribute government revenue of $50 billion per year. Moreover, immigrants who would enter under a fee system would generally make little use of welfare or unemployment benefits, would pay hefty taxes on their earnings, and would tend to be younger and healthier. So the overall direct economic benefits from larger numbers of immigrants would be much greater than under the present admission system. This would help quiet anti-immigration rhetoric as it induces countries to take more immigrants.
In addition, since anyone willing to pay the entry price could then legally immigrate, this approach should also cut down the number who enter illegally. Still, some persons will continue to try, especially if they want to avoid paying the fee, or only want to work for a short time in the United States. However, border and other immigration personnel would become more efficient in combating illegal entrants since they would have to deal with smaller numbers. It should become easier also to expel and even punish illegal entrants because they would get less sympathy from the American public than under the present system. After all, they usually could have entered legally, but tried to chisel out of paying.
In summary, charging a fee to immigrate would raise tax revenue, increase the number of immigrants accepted, and also raise the quality of those accepted. It is a win-win situation for countries accepting immigrants, and for the vast majority of persons who would like to immigrate.

So, we don't want the world to send us their "tired, poor, and huddled masses yearning to be free"? If the country had adopted Becker's pay-for-entry program years ago, we might have missed out on any number of wonderful citizens. Of course those with "value," I think of the Barishnikovs of the world, would likely have been underwritten, but I'm certain the relatives of great classmates (children of poor immigrants) would have been left out.